The Still Blurry Standards for Proving Trademark Dilution by jed wakefield and phillip haack

In 2006, Congress passed the Trademark Dilution Thus, the TDRA was expected to bring some much Revision Act, or “TDRA.” Hailed by some and criticized needed clarity to the question of what sort of proof by others, the TDRA was widely expected to make it was required to prevail in a dilution case. The TDRA easier for the owners of famous trademarks to prevail provided that proof of actual dilution is not required, in claims for trademark dilution. Unlike trademark and that the owner of a famous and distinctive mark infringement, which occurs when there is a likelihood is entitled to injunctive relief against uses of the mark of confusion between trademarks, dilution occurs that are likely to cause dilution. 15 U.S.C. § 1125(c)(1). when there is a “lessening of the capacity of a famous While this legislation was expected to make things mark to identify and distinguish goods or services” easier for the owners of famous marks, recent and can occur through “blurring” or “tarnishment.” cases show that trademark dilution remains as Dilution by “blurring” occurs when a famous mark unpredictable as ever. In Starbucks Corp. v. Wolfe’s becomes identified with more than one type of Borough Coffee, Inc., 559 F. Supp. 2d 472 (S.D.N.Y. good, such as might occur if consumers encountered 2008), the famous coffee-maker brought suit against “Polaroid” shoes or “Rolls Royce” toothpaste. Dilution a coffee shop in New Hampshire that was using the by “tarnishment” occurs when the mark is disparaged trade name “Mr. Charbucks” on a coffee blend sold through association with a low quality or unsavory in-store and over the Internet. The original case was product, such as the use of the children’s game title brought under the pre-TRDA dilution law, and the “Candyland” with an adult website. court found that Starbucks had not proven actual Prior to enactment of the TDRA, courts had split on dilution. Congress passed the TDRA while the case whether the owners of famous marks had to prove was pending in the Second Circuit, leading the court to “actual” dilution, or a “likelihood” of dilution. In vacate the judgment and remand the case for further 2003, the Supreme Court resolved the split in Moseley proceedings. v. V. Secret Catalogue, Inc., 537 U.S. 418 (2003), On remand, the district court found “Starbucks” holding that proof of actual dilution was required. mark both famous and distinctive, but it held that Speaking to concerns about the expense of “often plaintiff had not demonstrated a likelihood of unreliable” consumer surveys and other means of dilution. Perhaps most importantly, the court found demonstrating actual dilution, the Court held that that the marks, as used in the marketplace, were such direct evidence “will not be necessary if actual not substantially similar—that “Mr. Charbucks” was dilution can reliably be proved through circumstantial instead “playfully dissimilar” to the “Starbucks” evidence.” mark. The court found “strong similarity” between The Supreme Court’s holding left practitioners and “Starbucks” and “Charbucks,” but noted the trademark owners at a loss as to what kind of evidence importance of looking at the junior mark in the sufficed to demonstrate actual dilution. Judge Posner, commercial context in which consumers are likely speaking for the befuddled masses, observed that to encounter it. The court found that the addition of “the Court did not explain and no one seems to know “Mr.” to the mark, coupled with significant differences what that ‘circumstantial’ evidence might be.” Ty in the products’ logos and packaging, were sufficient Inc. v. Softbelly’s, Inc., 353 F.3d 528 (7th Cir. 2003). to distinguish the marks to the extent that the similarities did not rise to the level of dilution.

fenwick & west The court also found that the coffee shop intended a dilution claim to prevail, noting the TDRA’s emphasis to create an association with the “Starbucks” mark, on “the extent to which the marks are nearly identical but that such association was not likely to impair the and the strength of the senior mark.” However, the mark’s distinctiveness. Indeed, the court felt that Ninth Circuit held that the trial court had applied the “Mr. Charbucks” was designed to signal that the “nearly identical” standard too narrowly when finding product was a very dark roast and unlike the other the marks not similar enough to support a dilution products sold by defendant. However, given that claim. It further held that the eBay mark was so highly the marks were not, in the court’s view, substantially distinctive that consumers would be likely to see the similar, such an intended association was not found Perfumebay mark as essentially the same as eBay’s to be “indicative of bad faith or of an association mark, despite their notable differences. likely to cause dilution by blurring.” The court cited In a third recent decision, the U.S. District Court Fourth Circuit authority for the proposition that where for the Western District of Kentucky issued a final a junior mark parodies a famous mark but does not decision in the Victoria’s Secret case, 558 F.Supp.2d communicate that it is the senior mark, no blurring 734 (W.D. Ky. 2008)—the case that had gone all the exists. way to the Supreme Court and lead Congress to In contrast to the outcome in the Starbucks case, amend the dilution laws. That case turned on whether the Ninth Circuit’s take on the matter in Perfumebay defendant’s use of the marks “Victor’s Secret” and Inc. v. eBay, Inc., 506 F.3d 1165 (9th Cir. 2007), “Victor’s Little Secret” in connection with adult- demonstrates reasoning much more favorable to oriented products diluted the famous “Victoria’s senior mark holders. In Perfumebay, the well-known Secret” mark. In a puzzling decision, the district online auction site claimed that “Perfumebay” and court there found that all factors under the TDRA for “PerfumeBay” infringed and diluted the “eBay” evaluating “blurring” supported plaintiff, but found mark. The Ninth Circuit noted that in internet search the evidence insufficient to show that blurring was engine results, as well as in the domain name itself, likely to occur. However, the court found that evidence the “perfumebay” mark completely incorporated that one individual was offended by defendant’s the “eBay” mark. In addition, eBay offered survey use of the mark supported a finding that dilution by evidence that consumers associated websites tarnishment was likely to occur. using the term “bay” with eBay, and the founder of For practitioners, these cases are difficult to reconcile. Perfumebay admitted that the company had received For example, there is no reason why “Victor’s Secret” calls from consumers asking if the site was associated could not be viewed to be just as playfully dissimilar with eBay. to “Victoria’s Secret,” as was “Mr. Charbucks” to the Like the Starbucks court, the Ninth Circuit stressed the “Starbucks” mark. Similarly, many would find the importance of evaluating the marks in the context in marks at issue in Starbucks to be more similar than which they are typically seen by consumers—in this those in eBay. Also, the term “Charbucks” on its case, on the Internet. The court reasoned that the face would seem to evoke images of burnt coffee—an textual nature of the Internet limited the number of unsavory association tarnishing the plaintiff’s brand ways in which a junior mark could distinguish itself as did “Victor’s Little Secret.” And why the eBay court from the senior mark, and textual similarity should, in was persuaded by survey evidence that simply showed such a case, be accorded more weight as a result. a mental association regarding the word “bay,” while the Starbucks court found similarly strong survey The Ninth Circuit also agreed with the Starbucks court results insufficient to tip the balance, remains an open in finding that the marks must be extremely similar for question.

2 the still blurry standards of proving trademark dilution fenwick & west If there is a lesson to be learned from these cases—other than the inherent unpredictability of proving something as vague and ephemeral as consumers’ mental associations—it is that the commercial context in which marks are actually used is critical. In the Starbucks case, for example, the Court discounted survey evidence that focused on the word “charbucks,” alone, when the mark actually used was “Mr. Charbucks” and was presented in connection with a distinctive logo. On the other hand, the context of Perfumebay—where consumers encountered the marks as mere strings of text on their computer screens—made much of the difference. For attorneys and experts crafting surveys, it is important to bear this contextual focus in mind, and to ensure that evidence of dilution reflects the marks as they are actually encountered in the marketplace. Finally, given the divergent outcomes and approaches in these cases, at least one thing has become clear: carefully consider venue before filing a dilution case.

For further information, please contact: Jedediah Wakefield, Partner, Intellectual Property Group [email protected], 415.875.2331

Phillip Haack, Associate, Litigation Group [email protected], 650.335.7932

©2008 Fenwick & West LLP. All Rights Reserved.

This update is intended by fenwick & west llp to summarize recent developments in the law. it is not intended, and should not be regarded, as legal advice. readers who have particular questions about these issues should seek advice of counsel.

3 the still blurry standards of proving trademark dilution fenwick & west